NZGBS: Richer With US Tsys After Fed Chair Leaves Door Ajar For Sep Cut

In local morning trade, NZGBs are 4-5bps richer after US tsys rallied strongly as Fed Chair Powell’s post-FOMC decision comments lean marginally to the dovish side. Fed Chair Powell left the door open to a rate cut at the next FOMC meeting in September provided the next two CPI reports give no cause for alarm.

• A late surge saw projected rate cut pricing into year-end strengthen vs. early Wednesday levels: Sep'24 cumulative -28sbp, Nov'24 cumulative -47bps, Dec'24 -72bps.
• US tsys also saw additional support from a haven bid on reports Iran is preparing a direct strike on Israel. The US 2- and 10-year yields finished ~10bps lower.
• NZ home values fell 0.5% in July, the fifth straight monthly fall. Median values remain about 16% below January 2022's peak, but still about 19% above the pre-COVID level.
• Swap rates are 4-5bps lower.
• RBNZ dated OIS pricing is 3-8bps softer across meetings beyond October, with mid-2025 leading. A cumulative 76bps of easing is priced by year-end.
• Today, the local calendar will also see the NZ Treasury’s planned sale of NZ$300mn of the 4.50% May-30 bond, NZ$150mn of the 4.25% May-34 bond and NZ$50mn of the 2.75% Apr-37 bond.